This pattern is relatively easy to notice because of its distinctive look. Lower highs and higher lows is something to be looking for as an indication that this pattern trend is forming. When two trend lines converge with the converging trend lines connecting and containing several peaks and troughs, then this pattern is indicated.

Once one of those peaks “break out” of this barrier, it can indicate a powerful bullish or bearish movement that investors can take advantage of if they know how to look for it. If the break out point is manifested at a trough point, this can indicate a strong movement into bear territory and an excellent indication that it is time to get out. If the break out point is at a peak, this can indicate a bull movement and a good time to invest.

The duration of these patterns can vary greatly and quite frequently large patterns whose momentum dies out because investors are unsure of which way the market will react. These patterns contain two or more swing highs and lows when it comes to price, and investors need to prepare to adjust trend lines with more “swings” to level the playing field. These types of patters can often confuse investors, and they lose volume because they appear to be “aimless,” but for those who know how to look for the breakouts, these patterns can give a great indication of when it buy-in and when to get out.

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ChrisDouthit
ChrisDouthit

The founder of OptionStrateigesInsider.com has a long history with options and an extensive education in finance. Holding an MBA and multiple finance degrees, Chris has put in the time and effort to learning the market fundamentals.